The dog that didn't bark

BEING a firm of business advisors, our team at Haines Watts were only too aware that with much of the pre-Budget publicity being focused on potential tax increases around Income Tax personal allowances, a reduction in pension allowances together with Capital Gains and Inheritance Tax increases, it was all fairly 'doom and gloom'.

The 'mood music' however didn't fit in with the real economy which has shown record levels of employment together with the first increases in real wages for many years.

The welcome news was that personal allowances have risen to £12,500 pa which helps take the poorest out of Income Tax. Surprisingly, a full-time worker on the National Living Wage, would still be liable for Income Tax prior to the effect of tax credits. Nevertheless, the increase in personal allowances shows the Government have recognised tax is a significant cost in household budgets, although the operation of PAYE, means people don't always realise how much Income Tax they pay.

The starting income for higher rate tax has now risen to £50,000 after a number of years of no movement, although the benefit of this has been mitigated by an increase in employee National Insurance upper earnings limits to £50,000. What the Government gives with one hand it takes with the other.

In terms of our own core market, that of business owners, the effective higher rate of income remains in place for earnings ranging between £100,000 and £125,000, before the rate drops to 40 per cent. It's a shame the Chancellor wasn't able to make the moral case for low taxation and remove this anomaly.

Thankfully, pension tax reliefs remain unchanged and any such changes would have merely highlighted the growing pension divide between 'gold plated' public sector and the wealth generating private sector. Thus, there's still a window of opportunity for pension planning and anything that can be done to mitigate the effective 60 per cent rate of Income Tax is to be welcomed.

The business side of the Budget saw welcome changes to Capital Allowances, with a five-fold increase in Annual Investment Allowances to £1,000,000. The introduction of a new Structures and Buildings Allowances which is available on new commercial buildings contracted for and brought into use after Budget Day is to be welcomed, although in many ways it has striking similarities to the old Industrial Buildings Allowances.

Corporate tax rates remain unchanged. Although in the event of reverting to WTO terms on Brexit, the window's been held open for significant Corporation Tax reductions in a Spring Budget. Nevertheless, UK corporate rates still remain some of the lowest in the G20, which is welcome news for our international competitiveness.

In conclusion then and notwithstanding the gloomy predictions, the Budget was nevertheless helpful in maintaining the international competitive position of UK PLC and hence, 'the dog didn't bark'.

For more information on any aspect of the above or how the budget might impact you or your business, contact Nigel Syson, Associate Tax Director at Haines Watts on nsyson@hwca.com or 01604 746760.